Stocks make little progress with Treasury yields choppy in holiday-shortened session

NEW YORK, July 3 (Reuters) – Wall Street stock indexes were virtually unchanged on Monday while Treasury yields were higher after falling earlier as investors eyed a mixed bag of economic data ahead of the second-quarter earnings season and managed uncertainty around central bank policy.

After earlier gains, European shares pulled back (.STOXX) and on Wall Street, while the Dow was up slightly, the S&P 500 and the Nasdaq were struggling to decide on a direction in a shorter trading day ahead of the U.S. July 4 holiday.

A widely watched section of the U.S. Treasury yield curve hit its deepest inversion since the high inflation era of Fed Chairman Paul Volcker, reflecting financial markets’ concerns that an extended Federal Reserve rate hiking cycle will tip the United States into recession.

U.S. manufacturing slumped further in June to levels last seen when the economy was reeling from the initial wave of the COVID-19 pandemic, according to a survey on Monday that also showed price pressures at the factory gate deflating. However, U.S. construction spending rose more than expected in May as a severe shortage of houses boosted single-family homebuilding.

U.S. data on Friday, which hinted towards cooling inflation, helped bolster gains in the tech sector and underpinned sentiment in world stocks. This saw the tech-heavy Nasdaq on Friday make its biggest first-half gain in 40 years. Apple (AAPL.O) closed with a $3 trillion market valuation for the first time.

“The trading you see today is a mix of some people speculating that the previous six-month worst performers will catch up and others speculating that the leaders in the first half will continue to outperform,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“We could be in for a volatile month of July because we’re not sure of the direction of the economy and Fed policy over the next few months and corporate earnings starting to come out in a couple of weeks.”

Still, MSCI’s world equity index (.MIWD00000PUS) earlier hit its highest level in just over two weeks, while the pan-European STOXX 600 index also hit a two-week peak before losing ground.

The Dow Jones Industrial Average (.DJI) rose 46.11 points, or 0.13%, to 34,453.71, the S&P 500 (.SPX) gained 1.75 points, or 0.04%, to 4,452.13 and the Nasdaq Composite (.IXIC) dropped 7.26 points, or 0.05%, to 13,780.66.

The pan-European STOXX 600 index (.STOXX) lost 0.21% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.29%.

Emerging market stocks (.MSCIEF) rose 1.59%. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 1.49% higher, while Japan’s Nikkei (.N225) rose 1.70%.

U.S. Treasury yields were last up but lost ground earlier after the economic data showed the manufacturing sector continues to struggle.

Benchmark 10-year notes were up 2.6 basis points to 3.845%, from 3.819% late on Friday. The 30-year bond was up 1 basis points to yield 3.8641%. The 2-year note was up 4 basis points to yield 4.917%.

The dollar was little changed against a basket of major trading currencies and gained against a yen that’s under intervention watch after the Japanese finance minister warned last week of excessive moves in the currency market.

The dollar index fell 0.029%, with the euro up 0.05% to $1.0915.

The Japanese yen weakened 0.13% versus the greenback at 144.51 per dollar, while Sterling was last trading at $1.2692, down 0.09% on the day.

Key U.S. data this week include the June payrolls report. Median forecasts are for the unemployment rate to fall slightly to 3.6%, while jobs are seen up 225,000 after May’s surprisingly strong 339,000.

Earlier, Japan’s Nikkei had closed at its highest level in 33 years. A Bank of Japan survey showed business sentiment improved in the second quarter, while the Caixin manufacturing survey dipped to 50.5, from 50.9 in May, showing a slowdown in China’s factory activity. That slightly beat market forecasts, but underlined the weakening economic trend.

Oil rose on Monday after top exporters Saudi Arabia and Russia announced supply cuts for August, overshadowing concern over a global economic slowdown and the potential for further increases to U.S. interest rates.

U.S. crude recently rose 0.5% to $70.99 per barrel and Brent was at $75.81, up 0.53% on the day.

Gold prices advanced slightly on Monday as weaker economic readings cast doubts over whether the Federal Reserve would stick to its hawkish policy outlook.

Spot gold added 0.4% to $1,926.49 an ounce. U.S. gold futures gained 0.29% to $1,926.60 an ounce.

Reporting by Sinéad Carew in New York; Additional reporting by Dhara Ranasinghe in London, Wayne Cole in Sydney, and Karin Strohecker and Amanda Cooper in London; Editing by David Evans, Mark Potter and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.

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